Electrolux takes on Whirlpool in U.S. with $3.3b GE buy

Sweden’s Electrolux (ELUXb.ST) said it would double United States’ sales by paying $3.3 billion for General Electric Co’s appliances business in its biggest ever deal, giving it the scale to go head-to-head with larger rival Whirlpool (WHR.N).

GE’s (GE.N) century-old household appliance business, which had $5.7 billion in last year’s revenue, could help the Swedish company expand beyond its core European market where growth has trailed that in North America.

Electrolux, the world’s second-largest appliance maker by sales, will see its annual sales in North America more than double to over $10 billion, similar in size to Whirlpool’s sales there. It also gets to keep the iconic GE Appliance’s brands.

While the price tag is higher than the $2.5 billion figure people familiar with the deal suggested to Reuters last week, analysts said the company was not overpaying. The deal includes GE’s 48.4 per cent stake in Mexican appliances maker Mabe.

Electrolux said the price was seven-7.3 times GE Appliance’s estimated this year’s earnings before tax, interest, depreciation and amortization (EBITDA), based on an enterprise value (including debt) of $3.45 billion, according to ThomsonReuters data.

Including expected yearly cost savings of about $300 million, the multiple paid for GE would be much lower at around five times EBITDA, Electrolux Chief Financial Officer Tomas Eliasson, told a conference call.

“If they manage to realise the synergies, it’s clearly a good multiple,” said Kepler Cheuvreux analyst Johan Eliason, adding the inclusion of the Mabe stake would strengthen Electrolux’s position in Latin America on top of the clout it is gaining in North America.

“They’re getting access to both North and South America in a very good way, and will become very strong in all of the Americas,” Eliason said.